Bonds in limbo

Sewer treatment, park funding in jeopardy

February 2, 2014

MARTINSBURG - Some local officials are starting to get antsy about state grants that were promised to help pay for improvements to several wastewater treatment plants throughout the Eastern Panhandle, and about funds to make major renovations at Cacapon State Park.

Both programs were to have been financed with state-issued bonds, which local officials expected to be issued by the end of last year. However, neither bond issue has been floated.

"The sewer bonds have to be resolved," state Sen. Herb Snyder, D-Jefferson, said in a recent telephone interview. "They can't kick that can down the road much longer."

In 2011, the state Legislature passed Senate Bill 245, which Snyder shepherded through the legislative process. SB245 set aside $6 million in excess lottery funds for 30 years to finance bonds to help pay for improvements to 12 sewer plants across the greater, eight-county Eastern Panhandle.

The improvements are necessary to comply with new, strict mandates issued by the U.S. Environmental Protection Agency to reduce nitrogen and phosphorus discharged by sewer plants in the Chesapeake Bay watershed.

The Panhandle is in the Potomac River watershed. The Potomac is one of the bay's major tributaries.

Depending on the interest rate, the bonds were expected to raise between 30 and 50 percent of the costs to make the necessary upgrades to the sewer plants. The funds from the bonds were to be divided among the dozen sewer plant projects based on their costs and distributed as grants.

The total cost of the 12 sewer plant projects was projected to be about $200 million.

The combined costs of projects in Martinsburg and Berkeley County were expected to be about $100 million. The City of Martinsburg and the Berkeley County Public Service Sewer District were expecting to get at least $15 million to $16 million each from the grants for their projects.

The balance of the costs would be paid for by increasing sewer rates. The more money the city and the sewer district can get through the grants, the less sewer rates would have to be increased.

The various grant amounts were to have been certified by the state Infrastructure and Jobs Development Council and issued by the state Water Development Authority.

Local officials were expecting the bonds to be issued in 2012, but they were not. According to reports at the time, the IJDC could not certify the grant amounts that would be distributed to the sewer plant projects, because all the projects had not submitted their final cost projections.

In 2012, at Snyder's behest, Gov. Earl Ray Tomblin introduced legislation, Senate Bill 596, that essentially told the IJDC to certify the latest estimated costs and to issue the bonds.

Local officials then expected the bonds to be issued by the end of June 2013. They were not.

"The bonds will be issued by the end of the year, if not sooner," Jim Ellars, executive director of the IJDC, told The Journal in a telephone interview at the end of September. "We're working out the details. The ball is rolling. It's a tedious process. There is a lot of legal and financial work that needs to be done."

The bonds have not been issued.

In a recent telephone interview, Ellars said, "I'm not aware of anything holding up the issuance of the bonds. We fulfilled our obligation. The executive must give direction to the issuing agency, which is the Water Development Authority. What needs to happen is to get direction from the governor."

Snyder agreed that the answer lies within the governor's office.

"We're making an honest effort to resolve this in the governor's office," he said. "I'm optimistic. It must be done. There's no way to weasel out of this."

The Journal contacted the governor's office recently about the bonds and received the following email from Amy Shuler Goodwin, director of communications:

"The Tomblin Administration is committed to fiscal responsibility and continues to work with the legislative leadership on ways to maintain the State's bond rating and long-term debt service coverage ratio. The Governor recognizes the stress, from a variety of factors, on the Regular Lottery Fund and Excess Lottery Fund. The Governor has introduced legislation during the regular session that will address this issue and discussions on such legislation must continue before any additional action can be taken on the bonds for the state parks."

In a followup email, The Journal asked if this applied to the sewer bonds, also.

"Yes. Both the 'Chesapeake Bay' and parks projects were funded from the same source: excess lottery," Goodwin replied.

In 2012, state legislators passed Senate Bill 362, which was sponsored by Snyder, that set aside $3 million a year from the excess lottery fund for 30 years to finance bonds that would pay for construction of an addition to the Cacapon State Park lodge and make renovations to the park, and for construction of a new lodge at Beech Fork State Park in Wayne County.

Tomblin signed SB362 at Cacapon State Park in April of last year and in October, he signed papers at the Morgan County Courthouse certifying the sale of the bonds authorized by SB362 for the construction projects at the two state parks. The costs of the two projects total about $52.5 million.

Those bonds have not been issued yet, either.

"I'm not as optimistic about these bonds being issued," Snyder said. "That's more in jeopardy of not happening."

However, Snyder has suggested that the state could loan itself the money from the state's rainy day fund and pay back the loan.

"That way you're paying yourself interest on your own money and you don't have the cost of bonding expenses," he said.

Last month, members of the Berkeley County Council approved a letter to be sent to Tomblin imploring him to communicate with them about the grants guaranteed by SB245.

"This letter expresses our need for some kind of funding for this project that needs to be funded some way, or the people who pay the sewer bills in this county are going to be hit with something frankly I'm not sure anybody could handle," Norwood Bentley, the council's attorney, said at the time.

Also, members of the Region 9 Planning and Development Council unanimously approved at their January meeting letters to be sent to the administration supporting the issuance of the two bond issues for the sewer projects and the state parks construction projects.

On Oct. 1 and 2, Martinsburg closed on its bond issue financed with higher sewer rates to pay for its sewer plant improvements. Construction began around the middle of October.

Martinsburg also was given a bridge loan by the IJDC for $21 million as a stopgap measure until the SB245 grants are available so the city's project would not be delayed.

The sewer plants are supposed to be operational by the end of 2015, according to the EPA mandates.